11:55 p.m. | Updated
Bristol-Myers Squibb agreed late on Friday to buy Amylin Pharmaceuticals, the maker of a promising new diabetes drug, in a complicated deal that is valued at about $7 billion.
To help finance the transaction, Bristol-Myers is teaming up with AstraZeneca, which will pay about $3.4 billion in cash and will share in the profits from Amylin’s sales.
It is the latest deal by major drug companies to refill their product pipelines with new treatments, especially as older successful products lose their patent exclusivity.
Under the terms of the deal, Bristol-Myers will pay $31 a share in cash for Amylin, which is a 10 percent premium to the company’s closing share price on Friday. It is also 51 percent higher than Bristol-Myers’s original bid in February, which Amylin rejected but used as the basis for an auction of itself.
As part of the deal, Bristol-Myers will assume debt and will make a payment to buy out Amylin’s former partner, Eli Lilly & Company.
The multistep transaction ends months of speculation about the fate of Amylin, which has garnered interest from a number of suitors since putting itself for sale in April. Besides Bristol-Myers and AstraZeneca, others that had made bids include Novartis, Merck and Sanofi-Aventis, according to a person briefed on the matter.
Drawing these companies’ attention is Bydureon, a treatment for Type 2 diabetes that is injected once a week. It is a refinement of Byetta, which was introduced in 2005 and requires twice-daily injections. Both are derived from a hormone in the saliva of the Gila monster, a poisonous lizard found in the Southwestern United States and in Mexico.
“This is about expanding our diabetes franchise,” Elliott Sigal, Bristol-Myers’s chief scientific officer, said in a telephone interview on Friday. “It’s important to have different medical options.”
Mark Schoenebaum, an analyst at ISI Group, said the deal made sense for Bristol-Myers.
“I like it as a really creative way to do it,” he said. “I like the fact that they split the deal with AstraZeneca. I can’t remember seeing that before.”
The two drugs are in the class known as GLP-1 receptor agonists, which mimic the effect of glucagon-like peptide, a hormone that increases insulin production when blood sugar is high.
Byetta is injected twice a day. Prescriptions have been declining since 2008, in part because of safety concerns about pancreas inflammation and in part because of competition from Victoza, a similar drug from Novo Nordisk that needs to be injected only once a day.
Sales of Byetta were $517.7 million in 2011, down from $667.6 million in 2009.
But Amylin, which is based in San Diego, countered in January, when it won approval to sell Bydureon, which is injected only once a week.
Amylin also sells another drug called Symlin, which is approved to treat both Type 1 and Type 2 diabetes but which had modest sales of $103.9 million in 2011.
Mr. Schoenebaum said Bristol and AstraZeneca both needed new diabetes products because their collaboration has not gone that well.
One drug, Onglyza, has had disappointing sales in competition with Merck’s similar drug, Januvia. Another drug, called dapagliflozin, failed to win approval from the Food and Drug Administration in January, though it appears headed to approval in Europe.
Amylin came extremely close to going out of business in 1999, after Johnson & Johnson abruptly pulled out of a deal to develop Symlin. It received an emergency infusion of cash led by a software entrepreneur who thought the drug might be useful for his diabetic daughter.
Since then, however, the company has grown. It received a significant boost in January when the Food and Drug Administration signed off on Bydureon, after the agency twice denied approval because of potential side effects like heart rate abnormalities.
In defending Bristol-Myers’s higher revised bid, the company’s chief financial officer, Charles Bancroft, said in a telephone interview that the first offer was based only on publicly available information.
Bristol-Myers expects the deal to dilute its adjusted earnings per share until 2014. Mr. Bancroft said that he expected investors to support the deal because the addition of Bydureon could add significant value for shareholders.
The company will finance the deal with cash on hand and its existing bank credit facilities.
The deal is expected to close within 30 days of Bristol-Myers beginning a tender offer for Amylin shares. As part of the transaction’s terms, Amylin has agreed not to seek out higher bids.
Bristol-Myers was advisesd by Citigroup, Evercore Partners and the law firm Kirkland & Ellis, while AstraZeneca received advice from Bank of America Merrill Lynch and the law firms Davis Polk & Wardwell and Covington & Burling. Amylin was advised by Credit Suisse, Goldman Sachs and the law firm Skadden, Arps, Slate, Meagher & Flom.
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